Chairman Waxman's Climate Bill
To paraphrase German Chancellor Otto von Bismarck, don't ask how legislation or pork pies are made.
Think of the House Energy and Commerce Committee's new compromise on climate legislation as freshly baked pork pie.
Let's first consider the US emissions reductions goals. Did the Committee bake a pie small enough to get the US on the track to meeting scientifically defensible emissions reductions targets? No.
The bill would cap emissions 17 percent below 2005 levels by 2020, instead of the original draft’s 20 percent below. Committee chair/chef Henry Waxman essentially promised (again with some poetic license to your author) to bake a smaller pie -- later. He noted the bill retains its original target reductions in the future: 42 percent by 2030 and 83 percent by 2050. We will see -- later.
Let's consider the allocation of the highly valuable rights to emit. These are akin to slices of the pork pie.
The President campaigned on selling slices to fund clean energy and beleaguered consumers. But the Congress would prefer to get the credit for giving away pieces of pie itself.
In fact, this was Chef Waxman's secret ingredient. He bought support for the climate bill by doling out valuable slices for free. The bill gives 35 percent of the allowances to local electric distribution companies -- over a third of the entire pie in one gulp. Another free slice goes to the auto industry for research on new technology. Another one may go to refineries. Still more slices will be given to ailing manufacturing industries such as steel and cement.
That's a lot of pie.
Indeed, the pie is disappearing fast. It's over halfway eaten already.
Once it seemed likely that free slices might go to leaner, fitter wind, solar, biomass, and other green technologies. But did the committee dole out slices to clean energy when it sliced up the pie? If they did, we missed it.
Chef Waxman surely understands what he is doing. But is this the way the pie-baking was supposed to go? Chancellor Bismarck was right: don't ask how legislation or pork pies are made.
Breaking News: Climate Compromise in the House
The big news today in Washington is that the House committee working on climate change legislation has actually reached a major compromise that allows significant progress toward federal climate legislation this year.
The new deal calls for a 15 percent renewables target for a Renewable Electricity Standard by 2020, with an additional 5 percent to come from energy efficiency measures. The deal will expand the amount of biomass generation included, a crucial concession for southern lawmakers who worry their region might suffer economic impacts dispropornal to the rest of the nation.
On the structure of cap-and-trade, electric utilities will get 35 percent of the system's pollution allowances for free. The administration has pushed for auctioning all of the pollution allowances, while the House discussion draft distributed earlier remained silent on the issue.
A full version of the bill is expected as early as today with debate in House Energy and Commerce committee expected next week. Chairman Henry Waxman promised to get a bill to the House floor by Memorial Day. He now appears on track.
Is a Climate Deal Imminent?
Here in Washington, every day brings a new rumor about the fate of the attempt to pass comprehensive climate change legislation this year.
Today, the same day The New York Times ran an editorial supporting quick action on climate change, the Capitol is abuzz with the possibility that a deal is in the works.
The focus of speculation is, as it has been for months, the House Energy and Commerce committee, where members have been wrangling over the details of the Waxman-Markey discussion draft introduced this March.
Soon after, House leaders all held hands and said they thought it could get done this year. Then in late April, we heard leaders suggest that the focus was shifting to health care legislation, and that cap-and-trade would get shelved. (The leaders indicated they might push ahead with one piece of the bill: a federal Renewable Electricity Standard that is arguably a more potent short-term solution. That is looking increasingly palatable politically as well as a new wind industry poll indicates that 75 percent of votes support it.)
Now, according to Carbon Control News, a deal to advance the Waxman-Markey discussion draft is being worked out under which utilities would receive emission allowances free (rather than having to purchase them at auction).
We cannot assess the strength of this latest rumor, but it has always been our view that 2010, rather than 2009, was the year to circle on your calendar.
Despite energetic efforts by groups such as Al Gore's Alliance for Climate Protection -- whose director (Cathy Zoi) was tapped to lead energy efficiency and renewable energy programs at DOE -- nothing we have heard has caused us to change our view on this.
Climate Legislation Made Easy
Democrats in Congress released their most recent climate change bill yesterday.
The so-called Waxman-Markey discussion draft attempts to satisfy all constituencies:
The US Climate Partnership -- the powerful coalition of utilities, car makers, manufacturers and environmental organizations -- got its vision of a cap-and-trade scheme adopted. That means the environmentalists are pleased with strong GHG emission reduction targets (80 percent below 2005 levels by 2050). Meanwhile, heavy industrials (iron and steel, aluminum, cement, glass, chemicals and paper) will benefit from a 15 percent reserve of the system's emission allowances -- a structure designed to keep down allowance prices (and thus the cost of compliance) for businesses most vulnerable to international competition.
The renewable industry got a renewable portfolio standard, which would force utilities to provide at least 25 percent of their energy from renewable sources by 2025. The coal industry also came out with $10 billion to fund carbon capture and sequestration research. (That's on top of the billions already provided under the recently enacted stimulus plan.)
As critics have already noted, the bill fails to take on the make-or-break issues. For starters, it skips the thorny question of how to distribute allowances. The Obama administration wants to auction all of the pollution allowances while businesses are pushing to distribute some allowances for free.
Avoiding that issue allowed the bill to avoid another tricky one: where should any auction money go.
Critics will see these omissions as a fatal flaw -- akin to introducing a carbon tax proposal without a specific tax percentage.
I see this as a master stroke. The best chance for passing a cap-and-trade bill is to get the key adversaries -- environmentalists, vulnerable industries and coal -- to the negotiating table. Or at least to agree on the shape of that table. Then they can have a debate about these key issues out in the open.
Waxman and Markey have done just that. And set the stage to actually pass ambitious climate legislation this year.
